Tuesday's Editorial: Tax reform must put consumers first

Monday

The American taxpayer has an advocate. Judging from reaction of members of Congress, an effective one.

Nina Olson has been the National Taxpayer Advocate since 2001, leading a nationwide group including an office in Jacksonville.

Last week she testified before the U.S. House Subcommittee on Oversight of the Ways and Means Committee.

The issue was tax reform, especially the Better Way set of principles set out by House Speaker Paul Ryan.

The last major tax reform took place in the 1980s and it was followed by three significant bills to improve administration of the taxes.

Since that time, the IRS has slowly but significantly changed its emphasis from customer service to enforcement.

For instance, 43 percent of the IRS budget is devoted to enforcement while just 4 percent goes to customer outreach and education.

That, says Olson, is highly inefficient.

Customer service is more than a nice thing, it encourages taxpayers to do the right thing.

Most people want to pay their fair share of taxes but often need help.

For instance, only 40 percent of calls got through on the balance due line. This is nuts; these are people trying to pay their bills.

On the contrary, audits are expensive and often aren’t effective.

At the same time, the IRS has stonewalled on consumer protections by either narrowly interpreting them or ineffectively implementing them.

That’s how bureaucracy rebels.

For instance, the IRS posts seven pages of enforcement data on its website and just one page of customer service data as an afterthought.

As Olson has repeatedly noted in her annual reports, the IRS has been turning away from phone calls with taxpayers.

But the IRS cannot provide service if its funding is cut. Since 2010, funding has been reduced by 20 percent on an inflation-adjusted basis. At the same time, IRS duties have been enlarged as a result of the Affordable Care Act.

Morale at the IRS is low as a result of repeated criticism. "Many IRS employees feel besieged," Olson said.

Each year the IRS receives:

• More than 100 phone calls.

• Five million visits to Taxpayer Assistance Centers.

• About 10 million letters responding to tax adjustment notices.

As the saying goes, it’s a thankless job but somebody has to do it.

In order to make paying taxes less onerous and less painful for everyone, reforms are needed.

But Olson warns that vetting to avoid unintended consequences.

The IRS was slow to implement a Taxpayer Bill of Rights. Olson began suggesting it in 2007; it was implemented in 2014.

Some of the rights include the right to challenge and appeal IRS rulings, the right to representation and the right to a fair and just tax system.

Those rights need to become driving force of the culture of the IRS.

Olson suggests making the rights part of the tax code or instruct the IRS to make them part of its mission statement.

Ay reform of the IRS must include customer service as its foundation. As Rep. Vern Buchanan said, a Republican from Florida, only 2 percent of the IRS revenue comes from enforcement, 98 percent comes voluntarily.

SOCIAL SECURITY

Charles Schwab, founder of the investment company, offers some wise suggestions regarding Social Security in The Wall Street Journal.

Get rid of Social Security and Medicare payroll taxes on the first $50,000 of income.

This makes sense in that nearly 20 percent of those 65 and older are working, and most of them make less than $50,000 a year.

This would give seniors an incentive to work, since many don’t have sufficient retirement savings.

This money would serve as a boost for the economy, as well.

Schwab also suggests ending taxes on Social Security benefits for those who continue to work. That’s double taxation.

D.C. BOOMTOWN

Why aren’t more tax reforms enacted for working class Americans? Probably because many of those in the Washington, D.C. area live and work in one of the most fortunate metros in the nation.

During the Obama presidency, jobs increased by 22 percent, noted James Freeman in The Wall Street Journal.

In addition, this public service often involves little sacrifice.

Many federal jobs pay more than their private sector counterparts, reported the Congressional Budget Office.

As the presidential election illustrated, the Washington and New York elite are far removed from much of the nation.

COLLEGE AND ADULTHOOD

Completing college has become so expensive and so necessary in the modern economy, that many young adults are delaying marriage and children.

We don’t even have a name for this new intermediate period of adulthood, notes Washington Post columnist Robert Samuelson.